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FMA Directs Derivatives Issuer to Address Misleading Advertising 

by Jeremy Muir

Published: March, 2021

Submission: April, 2021

 



The Financial Markets Authority (FMA) has issued a direction order to licensed derivatives issuer, Rockfort Markets (Rockfort), to address specific advertising statements.


Link to the media release is availablehere.


Who needs to read it? Why?


All businesses in the financial services industry should take note of the FMA’s latest direction order. Those businesses should take this latest action as a reminder to ensure practices continue to be compliant with the Financial Markets Conduct Act 2013 (FMCA).


What does it cover?


The FMA considered that Rockfort’s materials were likely to breach the FMCA, specifically the ‘fair dealing’ provisions under part 2 of the FMCA and advertising requirements for regulated offers under part 3 of the FMCA.


The FMA initially raised its concerns with Rockfort and Rockfort took some steps to amend or remove the advertising. However, the FMA considered its concerns were only partially addressed and issued a direction order under section 468 of the FMC Act to address specific advertising.


In particular, certain advertisements and statements:


  • were likely to mislead or were unsubstantiated, including certain statements claiming that Rockfort:
    • “exceed[s] the requirements of the Legislation and keep separate client money from our operating money” when in fact it is a legislative requirement; and
    • is a licensed and regulated “forex and share broker” when in fact these services are not licensed in New Zealand and not covered under Rockfort’s derivatives issuer licence;
  • gave the impression that trading in derivatives was “safe” or had not presented a balanced view of the risks (when, in fact, trading in derivatives is risky);
  • did not meet the requirements of advertisements for regulated financial product offers to include a prominent statement that a Product Disclosure Statement (PDS) is available; or
  • were inconsistent with the PDS.

Our view


The direction order comes as a timely reminder that the FMA is continuing to monitor advertisements and statements for compliance with the FMCA.


This also comes after the FMA’s recently proposed guidance about advertisements for financial products. See our note on the consultation for the proposed guidancehere.


What next?

If you have any questions in relation to derivatives, fair dealing and advertisements, or FMCA compliance in general, please contact one of our experts.


 



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